The high level of risk in the Knox County liquidity profile

The CreditWatch action primarily reflects the high level of risk in the
county's liquidity profile posed by its series 2016 bond anticipation
refunding notes (BANs) which we believe contain permissive events of default
and an acceleration provision. Currently, the outstanding contingent liability
is $5.5 million, which is equivalent to 103% of the county's general fund
revenue and 171% of its total cash on hand at the close of fiscal 2016. County
management has indicated that it plans to either amend the terms of the BAN or
refinance the obligation to mitigate the potential acceleration. The lender,
JPMorgan Chase Bank N.A., has certified that the county is not currently in
default of any of the terms, provisions, representation, or covenants made
with regard to the series 2016 BANs, which gives us comfort that the payment
will not be accelerated in the very near term. We expect to resolve this
CreditWatch placement within the next 90 days.
Knox County, encompassing approximately 388 square miles in southeastern
Kentucky, has an estimated population of 31,764. Barbourville is the county
seat and main employment center.